Explained — Why HDFC Bank shares ended lower on Monday despite a strong Q3 update

Shares of HDFC Bank Ltd. are among the top losers on the Nifty 50 index on Monday, January 5, despite reporting a strong quarterly update for the December quarter earlier in the day.

As per the update, the lender's loan book grew by 12% for the quarter from the same quarter last year, registering double-digit growth for the first time after the merger with HDFC Ltd. on a normalized base.

Deposit growth for the quarter was in-line with the advances, increasing by 11.5% from last year.

So why are shares lower?

Analysts argue that the issue concerns the Loan-Deposit ratio, which was earlier a headwind for the bank as well.

As per the latest numbers, the LDR has gone up by 50 basis points this quarter to nearly 99%, in contrast to the management's guidance to bring the number below 90% in the near-term.

With a higher LDR, deposit becomes a key constraint for growth as HDFC Bank has a higher LDR ratio after the merger.

This also raises questions on the lender's growth for the next financial year, as the management had indicated that growth in financial year 2027 will be higher than industry.

Shares of HDFC Bank ended 2.3% lower on Monday at ₹978.5, currently contributing over 40 points to the Nifty downside.